House of Commons
Monday 19 October 2009
The House met at half-past Two o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
Work and Pensions
The Secretary of State was asked—
The youth claimant count rate for September 2009, in the middle of a recession, stands at 5 per cent., the same rate as in September 1997 when the economy was growing. The latest figures show 469,600 18 to 24-year-olds on jobseeker’s allowance and 9,800 of them on it over six months. The equivalent figures for September ’97 were 385,000 on JSA and 65,000 on it over 12 months, and for September ’93, in the middle of the last recession, the figures were 805,000 on JSA and 209,900 in receipt of it over 12 months.
I am not entirely sure that the Secretary of State’s figures add up. My memory is getting a bit hazy as I get older, but I seem to recall one of the Labour pledges in 1997 was to reduce youth unemployment through the new deal. That figure is now up to almost 1 million, which is the highest rate ever—the Secretary of State has failed to mention any numbers in that regard. In fact, youth unemployment has been rising since 2005 when I thought we were booming, and not bust as we are now.
If the hon. Gentleman wants to discover what the figures are, I refer him to the Office for National Statistics. I should also like to point out to him the situation in the 1990s, before the introduction of the new deal for young people, when more than 200,000 young people were on the dole for over a year at the peak of the then recession. Today, that figure stands at fewer than 10,000 young people. Youth unemployment is rising in the middle of a recession, as young people are being affected as a result of the world recession and because of that problem we are increasing support, including an investment of £1 billion in more than 100,000 youth jobs, which the hon. Gentleman’s Front-Bench colleagues oppose.
I congratulate the Secretary of State on bringing forward schemes such as Backing Young Britain, as we need to focus on that. However, may I ask her to look carefully at some of the schemes that restrict entrance to new jobs to young people who have been employed for a certain amount of time, and which may therefore prevent young people who have not been unemployed but who have been working very hard picking up specific skills, such as in sport and leisure, from taking up key jobs? Will she make sure that such children are not disadvantaged?
The hon. Gentleman is right that part of the purpose of the Backing Young Britain campaign is to provide young people with support from the very moment they leave education or lose a job, so we can get them back into work as quickly as possible. A range of support is available for young people at all stages. I think it is also right to provide additional support for young people who have been out of work for many months. We have therefore introduced a guarantee to ensure that no young person should be out of work and on the dole for more than 12 months, because we need to prevent long-term unemployment that could scar them for many years to come.
I have to say to the Secretary of State that her complacency about youth unemployment is breathtaking. Under this Labour Government youth unemployment has reached a record high. One in five young people cannot find a job and we have the highest level of youth unemployment in Europe. At the beginning of a person’s working life, any period of unemployment can be devastating. Young people need help to get them into a job, so why are the Government making them wait 12 months before giving them that help?
The right hon. Lady’s claim is nonsense. As I made clear in answer to the previous question, we are increasing support by providing additional help for young people from the very moment when they lose their job or leave education. We are expanding the amount of available training and support, and we are investing more than £1 billion in youth jobs, which Opposition Members still oppose. Their stance is baffling. Councils and housing associations across the country all support creating jobs for young people so that they are never again abandoned to long-term unemployment, as they were by the right hon. Lady’s party in the ’80s and ’90s. We think it is right to keep investing to help young people get back into work; her party just wants to pull the plug.
The Secretary of State talks about extra help being given to young people at an earlier time in their unemployment, but the take-up figures for the young person’s guarantee show that only one in 136 young people is taking up the six-month offer; that is 1,550 out of 207,000 young people who have been unemployed for the requisite period of time. Is it not the case that this Government announce idea after idea to grab a headline, but are failing to give the real help that young people need? Is not now just the time for the Government to accept that the real help young people need will come from the Conservatives through our policy of referring young people to welfare-to-work providers after six months?
I think young people should be terrified at the prospect of help from the Conservatives, when the right hon. Lady’s party continues to propose cutting £5 billion from the support for the unemployed and wants to cut funding to the economy in the middle of a recession, something that Professor Blanchflower, formerly of the Bank of England, says would push unemployment up to 5 million. That would be devastating for young people. We should offer support early on and throughout any young person’s unemployment, and month after month keep increasing that support. That is what will get young people back into jobs.
At September 2009, there were 1,186 jobseeker’s allowance claimants in the Vale of York constituency. In September, 285 went on to JSA, but I am sure that the hon. Lady will welcome the fact that 315 people came off it.
Does the Minister accept that this is a record number of unemployed in the Vale of York, particularly in the 18 to 24 years category? May I remind him that when the Conservatives left government in 1997, youth unemployment was falling? He will have to fight an election on rising youth unemployment—what is he going to do to solve it?
I think the hon. Lady welcomed the fall in the September unemployment figures in her constituency. As I have said, the off-flow was 315 and the on-flow was 285, and I think that 315 is more than 285. I hope that she will welcome the future jobs fund in her area. The Yorkshire and Humberside tranche has £19 million to support young people in her area, helping them to get jobs. It would be a blank sheet of paper when it came to the Tory policy.
In the quarter to September 2009, about 1 million people left jobseeker’s allowance. We do not know exactly how many moved into work because there is no requirement for people to tell us, and it would not be cost-effective to use staff time to follow up every case.
About 50 per cent. of people leave jobseeker’s allowance within three months, about 70 per cent. within six months and more than 85 per cent. within 12 months. Naturally, the vast majority of those are getting into work. There is still plenty more to be done on unemployment, but this party will keep up the investment that has been successful so far in minimising unemployment levels during this recession.
Unemployment in my constituency has risen by more than 100 per cent. in a year and by some 80 per cent. since 1997. What figure is the Minister’s Department contemplating as the peak of unemployment in this country, and when does it expect that to happen?
As I am sure the hon. Gentleman knows from his previous work in my Department, we do not make our own unemployment forecasts, but it is interesting to note that the independent forecasters have been downgrading their predictions. I read of one this morning predicting that it would peak at 2.7 million. Meanwhile, forecasters such as Professor Blanchflower are saying that unemployment under the hon. Gentleman’s party, with the policies advocated by the shadow Chancellor, would mean unemployment rising to 5 million.
Are we keeping jobseeker’s allowance, which is just £64.30 a week, at very low levels to encourage people to enter the workplace? If it had kept pace with earnings since 1980, it would be worth over £100, and if the link had been reintroduced in 1997 it would have been £75. Will he encourage the Chancellor in his pre-Budget report to re-link it to earnings, as the TUC, all the poverty organisations and early-day motion 543 are urging?
I always listen carefully to my hon. Friend, as a critical friend, and I am sure the Chancellor will also be listening. It is important when considering JSA rates to consider also the entitlement to other benefits that go with it, such as housing and council tax benefit, so it would be untrue to say that that is the only money people have to live off.
Among the jobless in my constituency is a significant number of newly unemployed professionals who have a very long-term record of paying tax and national insurance contributions, and who find that the help available to them is minimal. What more will the Minister do under the newly unemployed professionals scheme, and how many people in this category have been assisted in my constituency?
We will continue to look at what we need to do for the executive unemployed. As the hon. Lady knows, from day one of unemployment, they have the opportunity for referral to an executive recruitment agency to assist them with job-seeking skills and getting them back into work. In September, 408 people flowed off jobseeker’s allowance but 393 flowed on, so the numbers actually fell in her constituency last month; but I cannot tell her how many of those were at the executive end.
Jobseeker’s allowance is one of those benefits whereby when the Department has overpaid because of official error, it has written to people to try to claw the money back. That process has been ruled unlawful, so can the Minister tell us what the Department’s practice will be in the future and whether it will be refunding money that has been unlawfully reclaimed from claimants?
Will it not have been depressing for a newly unemployed person to have heard the Secretary of State’s response in today’s exchanges? Her first response to the unemployment crisis is to reach for the history books and rewrite the statistics from the 1990s. May I take the Minister for Employment and Welfare Reform back to the question that his colleague failed to answer about the young person’s guarantee? Does not that guarantee take effect at 10 months—his policy and her policy is for 10 months—not 12 months, as she seems to think? [Interruption.] Is it not far too long for a young person to have to wait until they have been out of work for 10 months before they get the help they need? Would it not be far more appropriate for a young person to receive specialised individual help after six months?
The hon. Gentleman will know that a range of things are available to people from day one, such as basic skills training and referral to experts in respect of CV writing and so on, and that the young person’s guarantee comes into force at 12 months. The future jobs fund, which his party opposes, comes into play at 10 months—so, of course, the Secretary of State was right. He should know that the Tories are the party of unemployment; in this recession, they oppose measures that the International Labour Organisation says saved between 7 million and 11 million jobs worldwide—500,000 in this country—and they are proposing measures that would put the level of unemployment up to 5 million. Time and again the Conservatives have moved people off unemployment and on to incapacity payments—we are reversing that.
This winter, pensioners will again receive an additional payment on top of the winter fuel payment and be entitled to increased cold weather payments as part of a wider package of measures to provide real help to pensioners in the current downturn.
May I say to the Minister that I welcome that answer and the Government’s commitment to support pensioners, especially as it will be a cold winter? Will she consider the reintroduction of the £60 winter bonus? Will she have a conversation with the Treasury about that matter?
Many pensioners, including many veterans, qualify for disabled facilities grants from their local councils, but up and down the country far too many pensioners are being placed on waiting lists rather than being provided such facilities within six months, as is the mandatory requirement. Many pensioners are having to wait six months or longer to get facilities installed. Could her Department look into that, because many pensioners would benefit if the Government were to focus on that grant?
I am happy to make inquiries as a result of the hon. Gentleman’s question. Although this sounds like an issue for the Department for Communities and Local Government, rather than for the Department for Work and Pensions directly, I shall look into it and drop him a line.
Would my hon. Friend pledge that it is not Government policy to revert to the situation that existed prior to 1997, when the only help that pensioners received with their fuel bills was the cold weather payment, whereby they had to be freezing for seven—not five or six—consecutive days and then perhaps £8 was given? We do not want to return to that under a Tory Government.
My hon. Friend is quite right. I hope that he will give this Government credit for increasing the cold weather payments last year and this year to £25 a week, because fuel bills have been high. I point out to him that, as I am sure he already knows, a mere £60 million a year was spent on winter fuel payments when we came into office. We now spend £2.7 billion a year.
Young people are being particularly affected by the world recession. That is why we are funding hundreds of thousands of new opportunities for young people to help get them into work, including more than 100,000 youth jobs and targeted training in those areas that are recruiting, such as the care sector. We are also providing more apprenticeships and further education places. The most important priority is to prevent long-term youth unemployment.
A report from the Prince’s Trust, which is widely valued and respected, found that young people without qualifications are twice as likely to seek jobseeker’s allowance as young people with qualifications. Can the Secretary of State tell us how Government policies and plans will address that very serious problem?
The hon. Gentleman is right that the problem is most severe for those who have the fewest qualifications. They can find it difficult to get into work and that is exactly why we have introduced the September guarantee this year, which guarantees that all 16 and 17-year-olds can stay on in education. We have invested an additional £600 million in order to make that possible and to provide those additional places. We need to ensure that we have a growing number of apprenticeships and further education places, too. I notice that in the hon. Gentleman’s constituency—I think that he will welcome this—the number of 18 to 24-year-olds on the claimant count actually fell slightly last month.
One reason for youth unemployment is those 16 to 18-year-olds who leave school, do not go into education or training and fall out of the system because they do not qualify for benefits. My right hon. Friend has just mentioned the fact that the education leaving age will be raised to 18, but will she explain why that is so important, as the Scottish National party Government in Holyrood have said that they will not do that?
My hon. Friend is right that we need to ensure that young people do not fall through the net and that they get the support they need. That is why we think that it is right to make it an obligation that all young people should stay in some form of education through to the age of 18. That is the best way to provide them with a better long-term future as well as to increase their chances of staying in employment. That is why, as well as funding the additional education places, we need the requirement for young people to stay on in education.
The Secretary of State is aware that, as she has mentioned, record numbers of students have enrolled on apprenticeships and FE courses. What discussions has she had with the Business Secretary about ensuring that all those places are fully funded and that colleges are not losing out?
As the hon. Gentleman would expect, I have had discussions not only with the Business Secretary but with the Secretary of State for Children, Schools and Family about how we can work across the Government to increase the support for further education places and apprenticeships. We are also increasing the number of graduate internships to help people take that first step on the employment ladder as well as enabling them to stay in education.
Will the Secretary of State consider the situation in which a young constituent of mine finds himself? He is on jobseeker’s allowance and he has found a three-month Government-funded course in his chosen profession of leisure and training, but because he is technically not seeking work during those three months he has had his jobseeker’s allowance stopped. That has caused him financial difficulties. If we are trying to help young people to gain skills and to move into work, should we review that ruling?
I am happy to look into the individual case that my hon. Friend mentions. He will be aware that there is a lot of support to provide training for those people who are seeking work, including short-term pre-employment training places, which help people to get specific jobs, as well as longer term opportunities. It is right that we should provide those training opportunities and it is also right that we should do as much as possible to help people into work and to get that first work experience. People need training and, often, the work experience, too.
Will the Secretary of State join me in congratulating Kent county council, which reduced the number of young people who are not in employment, education or training in Kent by 12.5 per cent. whereas the equivalent figure rose by 11 per cent. in the rest of the south-east? Would she further agree that rolling out Kent’s example of technical schools and apprenticeships across the country would help to reduce unemployment among young people across the UK?
The hon. Gentleman may be aware that, in fact, Kent county council backs the future jobs fund, which is one of the programmes in which it is involved, to help young people get jobs and get back into work. Councils across the country support those youth jobs, and it is deeply disappointing that the Conservatives are the only people who oppose those jobs and want to pull the rug out from beneath them.
Long-term unemployment is lower than in 1997, much lower than it was during the recession of the 1990s, and much lower still than in the recession of the 1980s. Despite increases in unemployment, the numbers on key out-of-work benefits have fallen by about 450,000 since 1997. However, we are not complacent. The tailored support offered by the flexible new deal is the right strategic response to the challenge of long-term unemployment. The future jobs fund and the young person’s guarantee are the right measures for long-term youth unemployment.
I thank the Minister for that response. It is crucial that we ensure that the long-term unemployed have the right support, assistance and training to be able to access the jobs market again. Given that the practice in previous downturns was to encourage people into inactive benefits, what assurances can my right hon. Friend give the House that the number of people on such benefits does not increase in this downturn?
I thank my hon. Friend for the opportunity to remind the House that when the Opposition were in power they shifted people from unemployment on to incapacity benefit, whereas in just the last year, if we exclude students, inactivity as a proportion of the working-age population is down 0.2 of a percentage point over the past year at 15.3 per cent., which is testament to the efforts of the staff working in Jobcentre Plus, who do the work capability assessments, move people off incapacity benefit on to jobseeker’s allowance and then, crucially, into work.
That was a very helpful question from the hon. Member for Denton and Reddish (Andrew Gwynne). There are 2.5 million people on incapacity benefit. Under the Government’s invest to save proposals, for almost the whole of the next Parliament, if they were returned to office, only about 10 per cent. of those people could expect any help. Why do the Government not follow our approach, rip up the Treasury rules and start to help all those people from day one?
As the hon. Gentleman knows, both his party and my party are going in the same direction of travel, but he wants to go at a rate that there is simply not the capacity in the system to be able to deliver. He would have to hire 1,500 doctors from somewhere. I do not know where he is going to get them from—perhaps his cuts in the NHS will be so severe that they will be made redundant by the Health Secretary.
During the 1940s, 1950s and 1960s, Britain maintained a policy of long-term full employment, not unemployment, following the prescriptions of the great John Maynard Keynes. May I suggest to my right hon. Friend that we return to those prescriptions, fully embrace the wisdom of Keynes and abandon neo-liberalism once and for all?
My hon. Friend, who is a wise student of these things, will have noticed that the slightly unorthodox approach that my right hon. Friend the Prime Minister co-ordinated at the G20 London summit was much more Keynesian in character. As a result, as I said earlier, the ILO has assessed that the effect on unemployment across the G20 is a reduction of between 7 million and 11 million—with 0.5 million here in the UK—thanks to the policies adopted by the Prime Minister.
We are currently consulting on secondary legislation and remain on track for implementation from 2012.
Apart from the ever-increasing delay on personal accounts, and the ever-increasing expense, is not the real problem that by forcing people to save in a scheme that will then be means-tested, the Government are effectively setting up the greatest pension mis-selling scandal of the 21st century?
The proposals on which we are consulting and putting into effect were a result of the Turner commission, which began its deliberations in 2004, and the subsequent political cross-party consensus, which I thought we had, has led us to the implementation phase. The hon. Gentleman appears to indicate that the consensus is over. Is that the case?
Perhaps the Minister remembers that Turner said that the scheme should start in 2010. Does she accept that it would be sensible for any new Government to hold a review of personal accounts, especially in the light of the four-year delay in implementation that she recently announced? Can she confirm that the delivery authority will not sign any binding contracts with providers prior to the date of the next general election?
It seems to me, then, that the consensus is ending. I have not announced a four-year delay. What I have done is agree with the considered advice from the Personal Accounts Delivery Authority, which has looked at the sheer scale of the auto-enrolment that will see up to 10 million people saving for the first time into workplace pension schemes, with a guaranteed employer contribution. It would be folly to decide to do that too quickly and collapse the whole scheme. There is no delay; there is just good implementation that will not put at risk the architecture that we have to create from scratch.
Child Support System
There are currently 687,000 cases on the statutory scheme which are assessed under the current scheme rules, and 569,600 cases on the statutory scheme which were assessed under the rules in place prior to 2003.
My hon. Friend makes an interesting suggestion. At present the Child Maintenance and Enforcement Commission can provide support through the new child maintenance options service so that where both parents can agree, they can move out of the statutory scheme to private arrangements that best suit their circumstances. Perhaps if a model were provided, it would not give the flexibility that parents are looking for.
Does the Minister accept that a figure of over half a million people on the old scheme represents untold unfairness and hardship for many of those families? Will she look particularly at the position of those who are on war pensions? I have a constituent who is on a war pension and who has to pay more than £20 a week to the Child Support Agency, notwithstanding the fact that that war pension should be going to him.
Although I understand the concerns that the hon. Gentleman expresses about the different impact of the two schemes on different people, the fact is that for every parent who would gain by switching from the old scheme to the current scheme, another parent would lose. Therefore it would not be practical to transfer cases simply on the say-so of one side. If the hon. Gentleman wishes to write to me about his specific case with respect to war pension, I shall be happy to respond.
I am afraid I have to disagree with my hon. Friend. The Child Maintenance and Other Payments Act 2008, which we are implementing, introduced stronger enforcement powers to tackle the minority of parents who persist in avoiding their responsibilities. These include deduction of maintenance from bank accounts, recovery from deceased estates, application to courts for curfew orders and passport withdrawal, disclosure of information to credit reference agencies, lump sum deduction orders and deductions from private pensions. Further measures are being taken in the Welfare Reform Bill.
Measures that we have taken in the past decade have lifted 500,000 children out of relative poverty and halved the level of absolute child poverty. Had the Government simply uprated the 1997 tax and benefits system in line with prices, we estimate that around 2.1 million more children might live in poverty today. Measures announced in and since Budget 2007 are expected to lift at least a further 500,000 children out of poverty by 2010.
We are now in 2009, as I am sure the hon. Gentleman realises. The latest figures that we have relate to 2007, and our best forecast is that the measures taken since then will lift a further 600,000 children out of poverty. That will take us two thirds of the way to our target. The opportunity still exists to take further action and the economy is changing, so I am sure that the hon. Gentleman will be patient and wait until Question 1 in 2012, when we will have the answer to his question.
Is my hon. Friend aware that the biggest increase in child poverty took place between 1979 and 1997—in particular, when child benefit was frozen? Does she agree that any potential Government who in future froze child benefit would lead us to the biggest increase in child poverty, again, that this country has seen?
No one said that the task was going to be easy. On the contrary, because it is difficult we have introduced the Child Poverty Bill to maintain the pressure on the Government, in all circumstances, to achieve the eradication of child poverty by 2020. The most important thing, however, is that in the depths of the recession this Government have continued to take action to tackle that scourge.
I refer the hon. Members to the answer to Question 7.
Is my right hon. Friend aware of an organisation in Blackpool called Progress Recruitment, which, by working with Jobcentre Plus and the Connexions service, is helping young people with disability to get into work? One of its many successes is Rachel Lambert, who at just 17 and with severe physical disabilities has been helped into self-employment, now has her own business and is supported by further training at the Blackpool sixth-form college. The entrepreneurial can-do spirit applies to young people, and, whether they have disabilities or not, that is an option for them.
My hon. Friend is right, and we must ensure that we also help young people who have different disabilities and need additional help with different ways into work. She may also be interested to know that the proportion of disabled people in work has increased by about 7 per cent. to more than 50 per cent. in the past eight years, so for the first time there are more disabled people of working age in work than there are out of work—precisely because of the kind of programme that my hon. Friend talks about.
Is the Secretary of State aware that 947,000 young people between 16 and 24 years old are unemployed, of whom 500,000 claim jobseeker’s allowance? Some 38 per cent. of all unemployed claimants are young people, and the young unemployed of today are likely to be the long-term unemployed of tomorrow. Does she not agree that we need radical action to tackle youth unemployment? What are the Government doing to tackle it?
The hon. Gentleman is right to point to the fact that young people are affected by the recession. I think that he refers to the International Labour Organisation figures for 16 to 24-year-olds, which include more than 250,000 young people who are in full-time education and also say that they are looking for work. It is right that we provide a range of support from the very moment that young people become unemployed. So far, our work is preventing the long-term youth unemployment of previous decades, so about 10,000 young people are on the long-term claimant count, compared with 200,000 in previous decades.
Has the Secretary of State yet had the opportunity to consider the report published by the Federation of Small Businesses last week—“Small Businesses, Big Employers”—in which it makes the point that some 69 per cent. of apprentices are employed in small businesses but only 5 per cent. of small businesses are aware of the full range of help that is available to them for apprentices? What is she going to do about that?
The hon. Gentleman makes an important point. That is exactly why we announced only this year that we wanted to work with the Federation of Small Businesses so that it could take on not only more apprenticeships but more internships, particularly for graduate interns, who can often provide additional support for small businesses. Internships are also a great opportunity for young graduates to get their first bit of work experience. That is how they can benefit small businesses and young people. We are looking at ways to increase the support in jobcentres for small businesses to do exactly that.
I refer the hon. Gentleman to the answer I gave to the hon. Member for Wantage (Mr. Vaizey) a little while ago.
Eighty-six per cent. of smaller employers have said that they will review their pension arrangements ahead of the introduction of personal accounts. Of those, 41 per cent. have said that they will consider closing down their existing schemes as a result. Is not the Minister worried that this is a levelling down?
The real issue is that two thirds of people who work in the private sector have no opportunity of a workplace pension at all. That is why Members on both sides of the House agreed to introduce automatic enrolment in the 2008 legislation on pensions. The hon. Gentleman seems to be arguing, much as the Conservative party argued when we introduced the minimum wage, that if there is a minimum everybody reduces their arrangements to that minimum. It has not happened with the minimum wage, and I do not believe that it will happen with pensions.
We will design the information for employers and employees to ensure that we make the case positively for those who are automatically enrolled to stay in personal accounts. It is important that they contribute to pension saving to build the second tier of pensions on top of the improvements to the basic state pension that we are introducing next year, which will make it more universal, fairer and more generous.
From September 1997 to the end of September 2009, there was an 8.6 per cent. change in the number of jobseeker’s allowance claimants in England, with a 96.3 per cent. change in Wellingborough parliamentary constituency. However, the hon. Gentleman will be pleased to hear that in September the number of people leaving JSA exceeded the numbers coming on to JSA by 51.
Unemployment is higher across the country now than it was in 1997; unemployment in Wellingborough is actually double what it was in 1997. Why is it that when every Labour Government are thrown out of office, unemployment is higher than when they came to power? Is it not true that Labour is the party of unemployment?
As I have already said, it is not true: it is the hon. Gentleman’s party that is the party of unemployment. It is worth his noting, for example, the employment rate—2.5 million more people are in jobs now than in 1997. It is also worth noting that the number of lone parents on benefit in his constituency has fallen by 23 per cent. Looking at long-term unemployment, the numbers of young people claiming JSA for more than 12 months is a seventh of what it was when we came to power and a twentieth of what it was during the last recession.
My right hon. Friend realises that unemployment is a tragedy for those unemployed, but will he give us the percentage of those unemployed and those in employment over the past few years? If he does not have the figures now, will he send me a copy and put one in the Library?
I will gladly write to my hon. Friend with the detailed statistics that he asks for. I am grateful to him for his question, because beneath the exchanges that we have over the Dispatch Box it is important to remember that every person who is unemployed, and their family, is going through a crisis. However much heat we might generate in the House, we must not forget that.
Some 195,000 processes have begun for new ESA claimants, and we will migrate the rest of the incapacity benefit cohort from 2010 to 2013.
I am grateful for that answer, but my experience from my constituency case load, and the experience of the Inverness citizens advice bureau, is that the new rules for ESA are being used to exclude far greater numbers of people than were excluded from the previous benefit. In one case, a former member of staff at the Department for Work and Pensions was rendered unfit for work and retired on the grounds of ill health thanks to an assessment by an Atos Origin doctor. That same doctor then gave him a nil score for ESA. There is huge inconsistency in the process. Can the Minister assure me that Atos Origin doctors have not been instructed to—
There is a new assessment, which considers what people can do rather than what they cannot do. As I said, 195,000 people have begun that process, which is backed up with the pathways to work programme. We are assisting people to find employment. The incapacity benefit test is very different from the work capability assessment under the new arrangements, and part of the programme is that we want to see more people in employment rather than confined to incapacity benefit year after year.
My Department is today publishing research that has found that there is still significant racial discrimination in recruitment, so that similar applicants with ethnic minority names are less likely to get a positive response. We believe that that is completely unacceptable. It is also bad for business, because it is missing out on talent. We are considering ways to strengthen the approach to governance and procurement, and my right hon. Friend the Minister for Employment and Welfare Reform is looking at further ways to address the problem.
I thank the Secretary of State. We spotted that problem a long time ago, and I am glad that her Government now have too.
Over the summer, a 79-year-old disabled and deaf pensioner in my constituency had his pension payments suspended for a fortnight as a result of one of the random checks carried out by the Pension Service, for which he has received an apology. Will she undertake that in future, no pensioners will be left without any money at all because of an administrative checking system that clearly does not take any account of the needs of individuals in receipt of pensions?
My hon. Friend is right that we have increased the support, which has helped lift pensioners out of poverty. He is right also that it is not fair on people in their 50s, particularly their late 50s, suddenly to make them rip up their retirement plans and say that they have to work an additional year before they can get their pension. We know that we have an ageing population, and we have set out long-term plans to increase the retirement age, but people should have security to plan for their retirement. It is not fair otherwise.
I have seen that report from the TUC and, as ever, its interesting analysis. I refer my hon. Friend to the reply I gave to our hon. Friend the Member for North-West Leicestershire (David Taylor), who asked a similar question. It is important to take into account all the benefits to which people are entitled—not just jobseeker’s allowance or employment and support allowance, but council tax benefit and housing benefit. In the end, it is also important to ensure that we make work pay. My concern about the Conservatives’ proposals is that they want to shunt people around the benefits system—
Clearly, the recent serious rises in unemployment in the hon. Gentleman’s constituency, as elsewhere, have been as a result of the global recession. Unemployment has been rising all over the world, but it is worth noting that long-term unemployment in his constituency has fallen by 48 per cent., that long-term youth claimant unemployment has fallen by 32 per cent., that the employment rate has risen by 0.1 per cent., and that the number of lone parents out of work has fallen by 1.2 per cent. I am very happy to take credit for those figures.
My hon. Friend is no doubt aware of the decision to maintain at £25 the cold weather payment for this winter. We will shortly be announcing the results of the annual review of the weather stations, which we do in consultation with the Met Office.
The hon. Gentleman will be aware that, in fact, the number of children growing up in workless households has dropped since 1997 as a result of programmes such as tax credits, which help people back into work, and as a result of the substantial support that has increased employment among lone parents, and is continuing to do so even during what is a difficult recession. The Government believe that we need to keep cutting child poverty by continuing to support children and by supporting families into work.
Will my right hon. Friend take steps to stop the benefits of pregnant women being sanctioned? She will be aware that employers are not exactly falling over themselves to employ pregnant women. That goes absolutely nowhere towards meeting our child poverty targets.
My hon. Friend is right that we need to ensure that pregnant women are not discriminated against in employment. She may also be interested to know that we have recently tabled an amendment to the Welfare Reform Bill to remove the sanctions for families with children under one so that they are no longer financially penalised if they miss a work-focused interview when, for example, the child is very young and we would often expect parents still to be on maternity leave.
Earlier today the Minister told me that the Child Support Agency was going to get even more powers for enforcement. When will the Government stop giving the CSA more powers for enforcement and actually ensure that it uses the enforcement powers it already has?[Official Report, 29 October 2009, Vol. 498, c. 5MC.]
We have had this discussion already. In fact, the ILO figures to which the hon. Member for Banbury (Tony Baldry) referred include more than 250,000 young people who are in full-time education and say that they are looking for work—including part-time work. We are also concerned that youth unemployment has been affected by the world recession, and that is happening in countries across the world, but it is important that we do everything that we can to help young people and increase the support for getting them into work and training, rather than—as Opposition Members still want to do—to cut that investment just when it is needed most.
Some two thirds of tracing inquiries for mesothelioma and other industrial asbestos victims relate to post-1972 exposures when insurance was a legal requirement, but fewer than two in five are successful. What is the current position on the setting up of an employees’ liability bureau, as suggested by many Labour Members?
My hon. Friend will know that 98 per cent. of people can trace the insurance cover from their former centre of employment, and the Government are working with the insurance industry to look at those thousands of cases that remain. The insurance industry is looking to bring together all the different insurance policies so that they can address this. The work done by the unions and hon. Members has been raised with Lord McKenzie, and will be taken into account. We are keen to move forward.
The hon. Gentleman will have noted the significant improvement that we have seen in results over the last 12 years in his constituency and elsewhere. In 1997, only one third of young people managed to get 5 A*s to C, including English and maths, at GCSE, and now it is around a half. That is significant progress. The problem of NEETs is something that we are all focused on addressing, and that is why we have brought forward the September guarantee of a place for every 16 and 17-year-old in school or college, which his party does not support. That is also why we have brought forward the future jobs funds, funded by Government borrowing, which his party does not support. That is why we have brought forward a range of measures, costing £5 billion of Government borrowing, which his party does not support.
That might be difficult because of the volatility of the price of fuel. My hon. Friend will realise that in deciding on the level of the cold weather payments and the winter fuel allowance the general level of fuel prices is one of the factors taken into account.
I asked the same question to Sir Leigh Lewis 14 times and the Secretary of State six times in the Select Committee last week. I unfortunately got the same non-answer that the hon. Member for Scarborough and Whitby (Mr. Goodwill) got today, although it did indicate that the Government are looking at two thirds of the child poverty target next year. Is there any Minister who will admit what we all know—that the Government will not hit their 2010 child poverty target?
As we have made clear, we set the 2010 target and we continue to make progress towards it. We have measures in place, which are being introduced at the moment, that will reduce child poverty by a further 500,000. It is right that we continue to make progress and work towards the target, because too many of our children are still living in poverty and we want to bring those numbers down.
We established the post of Children’s Commissioner to be a fearless and independent advocate for children and young people. Following a rigorous Nolan selection process, the independent selection panel recommended Dr. Maggie Atkinson to me as clearly the most outstanding candidate to succeed Sir Al Aynsley-Green when he steps down in March next year. I accepted the panel’s recommendation and wrote to the Chairman of the Select Committee on Children, Schools and Families on 6 October informing the Committee that I had nominated Maggie Atkinson for the post.
That nomination has been widely welcomed.
“Maggie is an excellent choice and will fearlessly and independently promote the interests of children in England”—
not my words, but those of Martin Narey, the chief executive of Barnardo’s. Sir Paul Ennals, the chief executive of the National Children’s Bureau and a member of the independent selection panel, has said:
“Everyone who knows Maggie knows of her robustness, her independence of mind, and her strength of character. The children and young people judged her to be the best candidate for the post, and the interview panel were unanimous in their recommendation.”
The Committee held a pre-appointment hearing with Dr. Atkinson last Monday. I received a copy of its report on Friday, which I studied over the weekend, and have set out my response in a detailed letter to the Chairman. The Cabinet Office guidance on pre-appointment hearings states that Ministers will consider any relevant considerations before deciding whether to proceed with the appointment—for example, any new, relevant facts about the candidate’s suitability for the post, such as an undisclosed conflict of interest. The guidance also says:
“there may also be occasions where a candidate’s performance in front of the Select Committee is considered relevant to the post in question—although this should be exceptional.”
At the hearing, Dr. Atkinson gave, in my view, robust and intelligent answers to the questions put to her. In its report to me, the Committee says that it was satisfied that Dr. Atkinson demonstrated
“a high degree of professional competence”.
However, the Committee raised three specific concerns. The report questions whether Dr. Atkinson will do enough to assert the independence that the role of Children’s Commissioner requires. In her evidence to the Committee, Dr. Atkinson said that she would be unafraid to “speak truth to power,” and Sir Paul Ennals has said that she was
“the most fiercely independent of all the candidates.”
The report also questions whether Dr. Atkinson will challenge the status quo on children’s behalf and stretch the remit of the post, in particular by championing children’s rights. Dr. Atkinson told the Committee last Monday that she would be vociferous in speaking up for the most vulnerable children, such as children in young offenders institutions. Anne Longfield, the chief executive of 4Children, has said that Dr. Atkinson
“is renowned for her forthright, straight-talking approach which challenges us all to put the needs of children first. As such she will be a strong defender of children’s rights in England against all comers.”
It is my duty to appoint the best person for the job, and this should not be about politics, partisanship or personality. The judgment that I had to make was whether any new information in the Committee’s report should cause me to alter my nomination and—let us be clear—overturn the independent selection panel’s unanimous recommendation, a decision that would have been hugely unpopular with children’s organisations across the country. My conclusion having studied that report—it is set out in detail in my letter—is that the independent selection panel is right. The person best qualified to be the strong, effective and independent voice for children and young people in our country is Dr. Maggie Atkinson. On this basis, I have confirmed her appointment as the next Children’s Commissioner, and I commend this statement to the House.
In his very first statement, the Prime Minister pledged that major public appointments would be subject to scrutiny by this House. He argued that the Executive had too much power and Parliament too little. Why is the Secretary of State now rowing back from that principle? Why is he overruling the unanimous view of a Labour Committee with a Labour majority and a Labour Chairman? The Secretary of State clearly wants to push one particular agenda. It is the Committee’s job to provide independent scrutiny. Why exactly is this Secretary of State a better judge than a Committee of this House of who should be an independent scrutineer of the Government?
The Secretary of State has already appointed Dr. Maggie Atkinson to do his bidding in three patronage roles—as chair of a national expert group, as chair of a multi-agency steering and reference board and as chair of a new national work force partnership. In each of those roles, she has consistently supported Government policy in Department for Children, Schools and Families press releases. She has never been in the lead of any critique of Government policy. What evidence is there that she is not just another Labour establishment choice? May I ask the Secretary of State whether Ms Atkinson has ever been a member of any political party? Is it true that every time she has been appointed to a post in local government, the local authority was not Conservative controlled at the time?
The Chairman of the Select Committee has identified a pattern of behaviour from the Secretary of State. The Secretary of State has got rid of those who disagree with him, such as Lord Adonis, Cyril Taylor, Bruce Liddington, Ken Boston and Ralph Tabberer, while appointing individuals who are either pliant or conformist. Does he believe that that bolsters confidence in how he discharges his responsibilities? Does he think that it reinforces confidence in his belief in scrutiny when, instead of choosing to defend his decision in this place, his first instinct was to justify himself in a letter briefed out at 10.30 last night? What reassurances can he now give us that when it comes to public appointments and the running of his Department, there is no longer something of the night about the way in which he operates?
The responsibility for this appointment is the Secretary of State’s under the Children Act 2004, which established this post. I fully support the process of pre-appointment hearing and I have explained to the House the basis on which I reached my decision under the 2004 Act. The reason why I set out the issues in detail in my letter to the hon. Gentleman at 10.30 last night was that the Committee itself chose to publish its report at midnight last night, and I followed its lead.
On this particular point, it is a bit rich for me to be answering these questions from the hon. Gentleman, whose spokespeople have failed more than once in recent weeks, including last week, even to confirm that the Conservative party would keep the position of Children’s Commissioner at all, let alone appoint an independent person to that position. I do not mind what the hon. Gentleman says about me. I do not mind what hon. Gentlemen in this House, and even some of my hon. Friends, say about me—that is politics. But I do mind the integrity and standing of an independent and highly respected person—Dr. Maggie Atkinson—being impugned in this way, especially when she cannot be here to answer for herself.
I have at no time sought to play party politics with this decision. Nor have I at any time used this process to try to undermine the standing of the Children’s Commissioner in the way that is happening today in this House. I have accepted the unanimous recommendation from an independent selection process, which said that Dr. Atkinson would be the best champion for children and young people in our country—that is why I made my decision. I have to say that Dr. Atkinson will be no patsy at all.
As the Secretary of State knows very well, there is no one in this place—and there was no one on the Select Committee—who sought to doubt that Maggie Atkinson was a highly qualified, highly competent public servant. The question was whether she had the skills, the independence and the championing abilities to act in this particular role. Will the Secretary of State confirm that the advert for this job asked for someone who would be a “campaigner for children”? Will he also confirm that, when Mrs. Atkinson was asked by the Select Committee whether that was how she saw the job, she said, “I am not sure that the Children’s Commissioner is a campaigning role. It is a drawing to attention role”.
Speaking as a member of a party that accepts the role of Children’s Commissioner and wants someone to act in that capacity, may I ask whether the Secretary of State accepts that there are already concerns that the English children’s spokesman is already one of the weakest in the whole of the United Kingdom, and probably in the whole of the European Union? Does he also agree that there is a concern about whether this individual is already able to do their job effectively? Concerns have now been raised about the Secretary of State appointing a person who is a very effective public servant but who does not even see herself doing the job that was set down in the advertisement for the role.
Will the Secretary of State confirm that the other departmental bodies that require these pre-confirmation hearings are also those that are expected to have a large element of independence from his Department, including Ofqual and the schools inspectorate, as well as the Children’s Commissioner’s post itself? Does he accept that what those jobs have in common is that they need people in the top posts who will be ferocious watchdogs with no fear and with some inclination to be willing to bite, including those in his Department? Are we not in danger of getting instead a series of tame poodles to do the Secretary of State’s bidding, rather than the independent job that they are supposed to be doing? In future, is not the only answer for the Secretary of State and his colleagues either to accept the reservations of the Select Committees, or to withdraw from the role of choosing these individuals who have a key job in scrutinising the Department’s policies?
No, it is my job to consider very carefully the Select Committee’s view—and I did—and to make the right decision in the public interest. That is what I have done. The hon. Gentleman raises legitimate questions about the powers for the Children’s Commissioner in the 2004 Act, and the nature of the standing of that person and whether they should be appointed by Parliament or by the Government. However, those are issues for the Act; they were not issues for this particular selection process.
In terms of the selection process itself, it was done independently and rigorously, and any question about who was suitable for the job was addressed by the independent process. The conclusion was that Maggie Atkinson was by far the best person for the job, out of all the people who applied. It is true that the Committee Chair asked Dr. Atkinson whether she had had direct public relations experience. She said that she had never been a PR executive, but she had been heavily engaged in advocacy and in making a case, not only in leading a children’s service in Gateshead but in representing them all across the country during the Haringey period. To be honest, any of us who know her know that that is why she has been appointed to this post. That is why Barnardo’s said that it was “astonished” by the Select Committee report, the Children’s Society said that it was “disappointed”, and Anne Longfield said that it was “unfortunate”. The Association of Directors of Children’s Services also said that it was “astonished”. That was the reaction.
On campaigning, Maggie Atkinson told the Committee that this was “an influencing role, and a drawing to attention role, but to me the word ‘campaigning’ smacks of active politics. This is not a political appointment. Rather, this is not a political post.” She went on to say, “This role is not an inspector nor a political drum-beater. It is the holder of a very sharp light which is illuminated by the words and the wishes of children and young people and is shone on policy makers. It will seek out areas on which that light needs to shine. That is really important. It is not campaigning in a political sense, but the office of the Children’s Commissioner has the right and duty to say to those making policies”—this, that and the other. I will not go through the long quote. The important point is that she absolutely accepts the independent, strong advocacy role. To say that she is a tame poodle is unworthy of the hon. Gentleman, and unworthy of those who make those comments.
Everyone who knows Maggie Atkinson knows that she is the strongest, most fearless, most independent advocate. That is why she has been appointed, unanimously and independently. Those who do not want to abolish the Children’s Commissioner should start to support this post, rather than seeking to undermine it.
Does my right hon. Friend agree that the Select Committee conducted due process in this case in the best possible way? We were, across the parties, reluctant to make the decision and recommendation that we did, because we were impressed by many of the qualities of the lady who was being interviewed for us, but we did not know her and had no in-depth knowledge of her, as the Secretary of State obviously has. We nevertheless made our judgment on the basis of the interview of more than hour in front of the Select Committee. Is my right hon. Friend aware that the letter he sent to me today suggests that there will never be a case where a Select Committee can make any recommendation that any Secretary of State would accept?
I do not understand that final comment at all, as the guidance is very clear and it is my duty to take account of the Committee’s views, which I have done with great care and consideration. I have to say to my hon. Friend that the idea that he or other members of the Select Committee did not know of the director of children’s services in Gateshead, who had represented directors of children’s services over the previous 12 months, including during the baby Peter case in Haringey—and did not know of her capabilities, her strength and her independence—is baffling to me. I read the paragraphs in the report that referred to the Committee’s concerns, and I considered them very carefully indeed. I found no relevant considerations that would lead me to reverse the independent Nolan process, and the choice that I made is widely supported across the country. On that basis, while I took the process very seriously indeed, I did not agree with the Select Committee. I am the one accountable for the post. I made the right decision in the public interest and I stand by it absolutely.
Does the right hon. Gentleman accept that he has form here, as he was the chief adviser to the then Chancellor when they both brushed aside the Treasury Committee’s rejection of the appointment of Christopher Allsopp to the Monetary Policy Committee within hours of the recommendation being made? What is the point of having pre-appointment hearings if Government Ministers are going to ignore them completely?
It is very important that these things are considered very carefully by the Government in a non-political, non-partisan and non-personal way. It is also very important to approach these issues in a non-partisan and non-political way. My experience of the Treasury Committee suggests that that was always how it approached these matters, so we took its recommendations very seriously. I have to say, however, that Mr. Allsopp turned out to be an excellent member of the Monetary Policy Committee and a great advocate for growth and jobs in our country. I suspect that, in retrospect, the hon. Gentleman probably agrees with me that we were right not to go with the Treasury Committee’s recommendation on that day. As I have said, Mr. Allsopp turned out to be an excellent member of the MPC, but we took the hon. Gentleman’s views very seriously indeed.
I must correct the hon. Member for Surrey Heath (Michael Gove), who speaks for the Opposition on this particular policy. On Wednesday, there was no working majority of Labour Committee members able to participate and neither was there a vote, so how the hon. Gentleman can say that this was the unanimous decision of the Committee fails me. However, will my right hon. Friend reassure me that he can rise above the macho posturing, albeit that it comes from the unlikely source of the hon. Member for Surrey Heath, and concentrate on what is important—what we who champion the rights of children are concerned about, which is to appoint an effective Children’s Commissioner who will do the right thing for our children? That person is Maggie Atkinson.
The transcript shows very clearly that my hon. Friend’s judgment about the suitability of Maggie Atkinson for this post is the right one. I do not know the details of the proceedings and subsequent votes of the Select Committee, and it would be wrong for me to reveal conversations that took place in corridors. I looked in detail at the report, and I have no idea who on the Committee supported or did not support this appointment. As my hon. Friend has said, the matter was never put to the vote. I have considered the matter very carefully, and I have to put the public interest first. I decided that this was not about personality and politics, which is why I made the decision that I did.
Will the Secretary of State remind the House how many members of the so-called independent panel came from other Government Departments and quangos? Why does he think that it was more independent than a Select Committee of this House?
The point is that we have the Nolan process, which was set up on the recommendation of Lord Nolan before 1997 and which operates in the normal way. There were 40 candidates, and they went through that normal process. There was one independent member of the panel, Sir Paul Ennals, who said that Maggie Atkinson was the most fiercely independent of all the candidates. I understand that there was also—as is completely normal—a civil servant from my Department and a civil servant from another Department in Whitehall. [Interruption.] If the Conservatives do not support the Nolan process as well as not supporting the Children’s Commissioner, they ought to come clean rather than playing these games.
The fact is that we supported the Nolan process, and Maggie Atkinson was unanimously judged to be the best candidate for the job. Did I reject her? Did I go for person No. 2 or No. 3 on the list? Did I decide not to go for the most fiercely independent person? No, I did not; I did the right thing, which was to choose the strongest advocate for children and young people. That is what the Children’s Commissioner is all about, and that is why the Conservative party is so fearful of the role.
As a former teacher and, indeed, a former parliamentary private secretary at the Department, I can tell my right hon. Friend that in my opinion his Department has placed the most relentless focus on raising standards for children and young people that I have ever observed. Along the way, he has made tough decisions without flinching. This is one of them; it is the correct one, and it will hugely benefit children in this country.
I am grateful to my hon. Friend, but I have to tell her that the evidence for the rightness of the decision is not my words or even the words of those involved in the independent selection process. It is the words of Barnardo’s, 4Children, the National Children’s Bureau, the Association of Directors of Children’s Services and all the other organisations—including the children’s and young people’s panel itself—which concluded, independently of me, that Maggie Atkinson was the best person to do the job. That is why, whatever the politics, the right thing to do is the right thing, and that is what I am doing.
The Secretary of State said that he had read the views of the Labour-dominated Select Committee on this matter. Has he also read the excellent Select Committee report on bullying? If so, can he tell the House what he has learned from it?
As I have said, I am not going to go into the details of who was and was not on the Committee, who had the majority, and who led what charge. I think that that would be unworthy of the House and unworthy of the Committee, and I am not going to descend to those levels.
As for the question that the hon. Gentleman has raised, we have been very strong advocates of the stamping out of that kind of behaviour in all our schools in the country. However, this is not about personality, it is not about politics, and it is not about Labour-dominated Committees. I think that the hon. Gentleman should raise his sights, raise his game and understand the public interest in these matters.
My right hon. Friend is right to reject the synthetic anger on the Opposition Benches, particularly after last week’s statement of policy about putting politicians in charge of a whole range of appointments to stuff public bodies with political placemen. May I gently say to him, however, that while everyone respects his probity and sincerity in this matter, we are trying to bring Parliament back to life? If every time a parliamentary Committee makes a recommendation it is simply brushed aside, I am afraid that the idea that Parliament exists to work for the public will lessen in people’s minds rather than increasing.
I completely understand the point that my right hon. Friend has made. That is why we must all be responsible in the way in which we approach the issue of pre-appointment hearings. This is not the first time that there has been such a hearing—there have been many before, all of which have asked tough questions—but this is the first time that a Select Committee has failed to endorse a candidate and has published its report at midnight.
The question for me was whether I should respond in a thorough way at that time, or whether I should stand back and allow an independent, highly respected figure to be impugned. I decided that the right thing to do was study the details of the report, then make my response, and that is what I did. Unfortunately, the impugning has continued from the Conservative party. That, I am afraid, is what happens when issues of public interest are reduced to party politics.
I regret very much the way in which, in his opening comments, the Secretary of State tried to suggest that this was all about the Opposition having a go at the Government, and the way in which the hon. Member for Surrey Heath (Michael Gove) tried to suggest that it was all about a Labour Government possibly appointing someone who might or might not be a Labour sympathiser. The Committee that sat on Wednesday morning consisted of four Labour members, two Liberal Democrat members and two Conservatives. There was no vote, because it was quite clear what the majority of the Committee felt, and that is in the recommendations. What is the point of pre-appointment hearings if the candidate is told that he or she has got the job before the hearing, and the Secretary of State simply ignores everything that the Select Committee says?
As I have said, I am not going to go into the details of conversations in corridors or of how the Committee operated on that day—that is a matter for the Committee rather than for me. The hon. Gentleman raises a wider issue of importance, however. I was operating in accordance with the guidance, which had been discussed with Select Committee Chairs. I had to make a decision, and I did so on the basis of the Nolan process. I nominated my candidate, who was then to appear before the Select Committee for questioning. It is made very clear in the guidance that only in the most exceptional cases would the Committee not endorse the candidate, but it is also right to have proper scrutiny. It will be for others to judge, on the basis of the Committee report, the transcript and my report, whether this was an exceptional case. I have to say that that was not the view that I reached on the basis of my reading, and the fact that Maggie Atkinson is so widely supported by children’s organisations around the country for her independence, strength and integrity leads me to believe that for me to have rejected the Nolan independent process, and the unanimous proposal from that process in respect of this job, would have been the wrong thing to do, but—
Gateshead council has a proud history of appointing good officers. Indeed, over the years many of its officers have advised Governments. In fact, it was a Gateshead housing officer who advised a previous Conservative Government on the sale of council houses, so the idea that Gateshead officers are tied to a particular political party is nonsense. I know Maggie Atkinson—of course, I know a lot of people but that does not necessarily mean they are good candidates for the position we are discussing. I know about the work that she has done in Gateshead, and I know about the educational achievements and health improvements among children that we have had in Gateshead under her leadership. I know of her firm interest in the interests and rights of children, and I know that she is a strong character who believes in what she is doing. The idea that she would be bullied by anyone, let alone the Secretary of State, is nonsense.
I am trying to make progress today, Mr. Speaker, for children and young people. I fully accept the points about the lady’s track record in Gateshead. In answer to the question from the Opposition Benches about her party political affiliation or past post or roles, I must say that the whole point of the Nolan process is to take the politics out of this and to have an independent process. Therefore, it is not for me to start making political judgments at the end of the process. I accepted the unanimous recommendation at the end of this process. That was the right thing to do, and I would have thought that it would be a good idea to keep to Nolan processes rather than to believe that, or to brief newspapers that, the point of being in power is to put our place-people into positions. That is not the right way to go, even if that is what the Opposition want to do.
Defence Acquisition (Independent Review)
In December 2008, my predecessor asked Bernard Gray to undertake a review to identify improvements that we could make in the acquisition of defence equipment. On Thursday, I published Mr. Gray’s report and placed a copy in the Library of the House in advance of our defence policy debate. I said then, and I repeat now, that I apologise that Members did not have longer to read and digest a report that is both lengthy and complex, and I therefore welcome the opportunity that you have provided today, Mr. Speaker, for a further discussion to take place on its contents. Indeed, I suspect that today will not mark the end of the conversation.
Mr. Gray’s recommendations are far-reaching. We accept most of them and work is in hand, as part of a wider defence acquisition reform strategy, to implement the changes we agree are needed. Mr. Gray’s report has got the debate well and truly started, which I warmly welcome. This is an important subject, which we very much wanted to surface. That is why we commissioned the report in the first place. I am very grateful to Bernard Gray for the effort he has devoted to this, the analysis he has produced, and his support in developing with the Department proposals to implement many of the recommendations.
This is not a new issue. As Bernard Gray’s report highlights, all countries with significant defence capabilities face the same inherent complexities of military acquisition and have, over many decades, had to deal with cost and time overruns. Indeed, as the report says, many of our allies are complimentary about the UK’s efforts to drive reform in this area and model their systems on ours. In the past 12 years, we have implemented a succession of initiatives to improve acquisition processes, including smart acquisition, the defence industrial strategy and, more recently, the defence acquisition change programme. These have had a significant impact on performance, as the National Audit Office has recognised in successive reports. At its best, the Ministry of Defence’s project management is very good indeed. As the report observes, there are dedicated people at all levels in the MOD and among our suppliers, with a strong commitment to ensuring that the services have the equipment they need to deliver success on current operations and in the future.
The system works best when the need is most urgent. We have successfully provided £4.1 billion-worth of equipment to theatre in Iraq and Afghanistan through the urgent operational requirements system since those operations began. Our people, military and civilian, can be proud of that achievement, and the service chiefs have made it clear that our service personnel are never asked to undertake missions unless they are fully satisfied that they have the right equipment to do the job.
However, the Gray report also brings out, through analysis of a sample of individual projects, the problems that still persist. These include not only the tendency for programmes to cost more and to take longer to deliver than was initially estimated, but the further cost growth to which this gives rise and the pressure it places on limited resources—even in a period when the defence budget as a whole has grown substantially in real terms. It points to remaining skills gaps and to shortcomings in the existing arrangements for managing the equipment programme, and it argues for regular defence reviews to provide a strategic context for decisions on the equipment programme.
To some extent, the difficulties we and others face in estimating the cost and time to deliver projects reflect the fact that much modern defence equipment is at the leading edge of technology and is constantly having to adapt to meet evolving military requirements. Providing our armed forces with the best involves a degree of technical risk and uncertainty, but there are steps we can and must take in the light of the Gray report to build on earlier reform and to deliver a radical improvement in performance.
First, I have already announced that we will undertake a strategic defence review immediately after the general election. Preparatory work is already under way, and I intend to publish a Green Paper early in the new year. We will also examine legislative frameworks for implementing Bernard Gray’s recommendation that a strategic defence review be conducted early in each new Parliament.
Secondly, we will work to adjust our equipment programme to bring it into balance with future requirements and the likely availability of resources through the current planning round and, in due course, the strategic defence review. Thirdly, we will plan equipment expenditure to a longer time frame, with a 10-year indicative planning horizon for equipment spending agreed with the Treasury; and we will increase transparency by publishing that planning horizon and an annual assessment of the affordability of our programme.
Fourthly, we have already strengthened board-level governance within the MOD by establishing a new sub-committee of the defence board, as recommended by Mr. Gray. It is chaired by the permanent secretary as accounting officer and charged with determining, for agreement by the board and Ministers, an equipment plan that is aligned with strategy and is affordable and realistic.
Fifthly, we will improve the way we cost projects in the equipment plan, using better and more sophisticated techniques applied more consistently, and ensuring that investment decisions are based on the most reliable available forecasts. We will also improve the management of risk across the programme. Sixthly, we will introduce stronger controls over the entry of new projects into the equipment programme, and over changes in performance, cost and timing of individual projects.
Seventhly, we will sharpen the business relationship between the Ministry of Defence head office and the Defence Equipment and Support organisation, and the service commands, by further clarifying roles and responsibilities, and by establishing new arrangements to provide greater visibility of project management and costs in the DE&S to the capability sponsor in head office. Finally, we will accelerate the improvement of key skills, including in cost forecasting and programme management, in the DE&S and the Ministry of Defence head office.
All those changes are consistent with Bernard Gray’s main recommendations. I do not intend to take up his suggestion to establish the DE&S as a Government-owned, contractor-operated entity, and to put it more at arm’s length from the rest of the Ministry of Defence. The Government have thought about this carefully, but we are not convinced that such a change would ultimately lead to better outcomes for the armed forces or for defence generally. Having the DE&S as fully part of defence ensures a close working relationship with the military.
Equipment acquisition is core business for the Department, and we have to get it right. Based on these proposals, I intend to publish a wider, more detailed strategy for acquisition reform in the new year, to contribute to the work of the strategic defence review. I am delighted that Bernard Gray has agreed to work with us on this, and we look forward to pressing ahead and to making the changes that are needed.
I am grateful to the Secretary of State for his statement and for early sight of it. The handling of this report reflects much of the content of the report itself, in that there has been unnecessary delay, incompetence and an attempt to avoid responsibility. We could have had this report months ago. We could have given it time and thought over the summer recess. What did we get instead? Its publication barely an hour before the defence debate last week, with some poor excuses about how it had to be reviewed. Media management was about the only management skill that new Labour ever had, but now even that seems to have deserted it.
I, too, wish to thank Bernard Gray and his team for their hard work and for a job well done with this very substantial piece of work. To the credit of the Ministry of Defence, it is widely understood that it wanted to publish the report earlier, but No. 10 blocked that—we can see why it was blocked. It is because when he was Chancellor of the Exchequer, the current Prime Minister took little interest in defence, and we are now paying the price.
It is now clear that the Government have increasingly announced, and started, procurement programmes without ever considering whether any money would ever be made available. Children write letters to Santa Claus with comparable understanding between desirability and affordability. The procurement programme under Labour is becoming a wish list. The Secretary of State’s statement today was a poor, undetailed and superficial response to this complex report. Perhaps the Government will hold a proper debate in Government time to give the whole House more time to discuss it.
Having read the report, I do not think I have ever seen such a damning set of indictments: average time overruns are five years; average cost overruns are 40 per cent. more than the original cost; the total overrun is £35 billion, when we only have a defence budget of £37 billion and an equipment budget of £16 billion. In fact, expected cost overruns in the next 10 years alone amount to £16 billion, which is roughly £4.4 million per day of unfunded liability. Those sums are so large, and the report is so damning, that the shock value has almost diminished. In the words of Bernard Gray, the equipment programme
“is unaffordable on any likely projection of future budgets.”
We have too many types of equipment being ordered. There is a too large a range of tasks being covered by equipment. Equipment is being procured at too high a specification and with a built-in, sometimes purposeful, underestimation of likely cost. For example, the two-year delay to the future carriers—done on grounds that we can most charitably call utterly spurious by the unpaid Minister for procurement—will add £1 billion to the cost of the project, so to maintain the political fantasy that they are procuring the greatest amount of equipment in recent history, they stick £1 billion on to the taxpayers’ bill for the future and cut funding elsewhere, such as through the brutal cuts to the Territorial Army. How perfectly consistent for a Government under whom the interest on our national debt next year will be greater than the defence budget.
The fact that we have not had a strategic defence review in almost 12 years is a big part of the problem, but the problem also lies in the fact that the Prime Minister, as Chancellor, was never willing fully to fund Tony Blair’s wars. The consequence of both is that defence planning is not conducted in tandem with costings—perhaps the most devastating indictment of all. Again, in the words of Bernard Gray:
“In corporate life, no enterprise should persist with a 12 year old strategy without at least re-evaluating it fully on a regular basis. Few who would expect to prosper would even try to do so.”
Yet what is the Government’s response? First, to play catch-up with the Opposition. After 12 years we will get a Green Paper, perhaps eight weeks before Dissolution. What do they expect—gratitude that after 12 years the penny has finally dropped? We are to have regular defence reviews, too; the Opposition have proposed that for two years. And 10-year capital allocations; we proposed that, too.
When will the Secretary of State introduce his 10-year equipment budget plan? Will it be before the election, so that we can see it? He refers to improving the way the MOD costs projects using better and more sophisticated techniques. Can he tell us what he means? What practical measures will he take now to accelerate the improvement of key skills, including in cost forecasting and programme management, in the DE&S and the MOD head office?
The procurement process is broken and needs fundamental recasting. Many of its structures are upside down with cost control at the end and not the beginning. What does arm’s length mean for DE&S and why are the Government ruling out the Government-owned contractor-operated option? Given the importance attached by Mr. Gray to research and development, why has the Secretary of State cut a further arbitrary £100 million from the defence research budget? Surely that one action stands in complete defiance of the core Gray analysis.
The Secretary of State tried the old cop-out that these problems have occurred for many decades. Of course, after the Government have been in office for 12 years, the problems are not really their fault at all. However, the report clearly points out that not only has it been quantitatively worse under this Government but that problems are growing—and at an accelerating rate.
The Secretary of State is right about perhaps just one thing—yes, there are skilled and dedicated people working in his Department in procurement. Some of them are my constituents. However, they are stuck in a Department where there have been four Secretaries of State in four years. No one is driving—no one is in control—yet the country is at war. What more damning conclusions could there be in any report to any Government?
The hon. Gentleman is quite wrong on the issue of the report’s handling. He cannot have his cake and eat it. I am not suggesting that the time was adequate, and I apologise to him and to the House for the fact that it was not, although it should have been, but he had the report for a lot more than an hour—
He had the report for two hours—[Interruption.] I am not saying that that is long enough, so he does not need to gild the lily. He had the report for long enough for the Chairman of the Select Committee, his right hon. Friend the Member for North-East Hampshire (Mr. Arbuthnot), to be able to say that there were changes to the report from the version that we had seen earlier, which was leaked to a newspaper. The hon. Gentleman cannot have it both ways. Either the report was finished months ago and it should have been available to the House months ago, or changes were made, but he cannot have it both ways. The draft that was available in the summer was a draft and we have continued to work with Bernard Gray. The hon. Gentleman would have been the first to complain if I had put this report out during the recess, having missed the opportunity to put it out because we had not finished the work in the summer. I sought to put it in the public domain at the first opportunity after the House had returned.
The hon. Gentleman referred to the defence procurement programme as a Santa’s wish list, but why on earth does he not tell us what he thinks ought not to be in there? He is reluctant to tell us—
Absolutely, but I am trying to cast a little light in his direction and to try to get a little bit of clarity. Again, he cannot have it both ways. If it is a Santa’s wish list of unaffordable projects, he ought to be prepared to say what he thinks ought not to be in there if he wants to have any credit for the criticism that he is throwing at us.
The hon. Gentleman tries to suggest that this is a damning report that says that the system is broken. Bernard Gray says the quite reverse. He says in terms that
“this report dwells on areas where there are problems, not with the intention of saying that everything is broken or that the system as a whole is bad”.
That is a direct quote from the Gray report. On the issue of whether the Department is as good as others, I am not going to try to say that the problems have been going on for decades, although I am certain that they have. What the report says, again in terms, is that all nations with advanced defence capabilities, and therefore acquisition processes, suffer from exactly the same difficulties. We know more than many countries, and indeed other countries look to our process as a beacon showing the way to reform.
On the details of taking the programme forward, that is exactly what Lord Drayson is doing, and we will report in the new year to put flesh on the bones and explain exactly how we are going to take forward acquisition reform. The hon. Gentleman talked about the carrier, and he claimed that there was no good reason for a delay to the reprofiling of the carrier programme, but he knows that it was delayed to make way for a higher priority requirement—the Lynx Mk 9 helicopter, which is needed for current operations. These things will always happen. As things develop, and as military priorities emerge, from time to time, despite the fact that there is a cost involved—and I do not deny that there is a cost involved, which is why we commissioned the report—it makes sense to reprioritise, because other priorities become more important at a particular time.
Listening to the silken prose of the Secretary of State as he read his statement, one could barely believe that what he was describing was the report that we have all seen, and that stands as a damning indictment of procurement processes. One would hardly recognise it. I congratulate his wordsmiths—I think that he has secured better value for money on that budget than he has on procurement.
What the report actually tells us about is a gaping £35 billion black hole; too many types of equipment being ordered for too large a range of tasks at too high a specification; average overruns of five years or 40 per cent. financially; and frictional costs to the Department of £1 billion to £2 billion a year. The Secretary of State may not have chosen to say that the problems go back for decades, but I will do so, because some of the things that are coming on stream now were signed off decades ago—in one instance, by John Nott, when he was Defence Secretary. I do not think that the present generation of Ministers are, in all fairness, to blame for all this. In fact, on urgent operational requirement procurements, some ministerial decisions in the past couple of years were brave and commendable.
We need a radical shake-up, and some of the solutions that we have heard in this statement sound altogether far too familiar, which is more than can be said of the explanation from the Secretary of State about the justification for delaying the carrier programme, as it bears absolutely no resemblance to what we were told at the time. I thought that the logic that was squeezed out at the time was to get the programme to dovetail with the availability of the joint strike fighter, and certainly nothing to do with helicopters.
If we are talking about a “Santa’s wish list” model of procurement, not only must Ministers get on top of procurement, but so must the defence chiefs, because sometimes their unrealistic expectations of procurement cause the pursuit of something absolutely perfect to get in the way of the achievement of something that would really be very good. The armed forces themselves must be more realistic about their expectations in future.
In today’s statement from the Secretary of State, there are references to transparency. If those can become a reality, that will be very welcome and not a moment too soon. One of the impediments to proper scrutiny of procurement processes in recent years has been the extraordinary extent to which those processes are opaque by comparison with anything that goes on in other countries. What is the time frame for the implementation of the changes that he spoke about today? I hope they will not all be put off to a strategic defence review. I understand that that is imperative, but how many of these changes can we look forward to in the forthcoming Green Paper?
The hon. Gentleman castigates us, but fails to mention the fact that we commissioned the report in the first place. We did that knowing that it would not be a glowing exposition of a Department that got everything right. The reason for the report was that it was needed. I wonder whether any Liberal Democrat Government whom the country might ever have imposed upon it would dare to commission such a report.
The hon. Gentleman says that a £35 billion hole in the budget is exposed by the report. That is not true. That is not what the report says. From an extrapolation from some projects, the point being made is that there is the potential for a £35 billion growth from the original estimation to the final delivery, which is why forecasting is an absolute skill that needs to be upgraded within the Department. It is an extrapolation from a few samples and it does not try to say that there is such a gap in the budget. I think the hon. Gentleman has read that wrong.
However, I agree—the hon. Gentleman is right, and it is an issue that we have to grapple with—that in this area the best often becomes the enemy of the good. That is a major problem that we ought to tackle. It is far better dealt with in the urgent operational requirement process. Bernard Gray says that, although he did not look into the UOR process in any detail. Where there is urgency, for current operations, we get a better balance between what is needed, timeliness, and what is good enough to do the job that is badly needed by our armed forces.
On time scale, we will look to publish something in line with the Green Paper in January that brings forward a number of acquisition reform issues. We have not yet bottomed out a legislative process for dealing with the recommendation that a strategic defence review should be scheduled for the start of every Parliament. I should not have thought that that was beyond the wit of man. Working together, I think we could achieve it. We certainly could if there were cross-party agreement to do so.
Order. May I emphasise, as usual, that I would like to accommodate as many right hon. and hon. Members who wish to contribute to these exchanges as possible, but there is important business to follow in the form of a full-length Opposition day debate, so I am looking for single, short supplementary questions and to the Secretary of State for pithy replies?
I have been in the House for 30 years, and every time defence procurement has been discussed, we have described it as a shambles. Perhaps we ought to grow up and recognise that it is intrinsically very difficult to get defence procurement right and that it is always likely to go fairly wrong, for two or three simple reasons. The military, from experience in the field, ask for changes in the specification; technological change may bring about changes in the specification; and we have to try and buy British, even if the British are not necessarily the best suppliers.
My right hon. Friend says a great deal that is true, but that is not to say that we cannot do better. There is the issue of always trying to get the best, and the issue of responding to changing military requirements. Those must be balanced with time scale and getting what is good enough into being as quickly, as effectively and as cost effectively as possible.
This excellent report sets out a state of affairs that, as the Secretary of State rightly says, is not new, but it may have led to events such as the Nimrod crash of 2 September 2006. When will we see the report on that? Now that Bernard Gray’s 10-year rolling budget has apparently become a 10-year indicative planning horizon, we should at least be thankful that the Secretary of State has said that there will be an annual assessment of the programme’s affordability, but will it be subjected to an external audit by one of the large accounting firms, as Bernard Gray recommends?
An annual and transparent reporting process, coupled with the 10-year indicative budget, is a big step in the right direction. On Nimrod, we are in the hands of Mr. Haddon-Cave QC, who I believe may be giving his report in the near future. However, I have no control over that process or time scale.
Bernard Gray’s report is eminently readable, and he should be congratulated on that. In looking at some of the success stories that he finds, such as urgent operational requirements, possibly through-life capability and contracting for capability, I note that he points us in a direction that needs urgent work. I hope that some of the work strands for the Green Paper will draw them out. Can my right hon. Friend confirm that they will?
We commissioned the report, knowing that some of the findings would be painful, to try to address those issues, and now that we have it we have no intention of not learning the lessons that it identifies. Of course we will use the Green Paper process as part of bringing forward ideas on how we deal with those issues.
On the Secretary of State’s answer to my right hon. Friend the Member for North-East Hampshire (Mr. Arbuthnot), the Chairman of the Select Committee on Defence, and on the Secretary of State’s point when he said that “we will work to adjust our equipment programme to bring it into balance with future requirements and the likely availability of resources,” I must say that that is a great step back to the past. We used to do that in the mid-1990s. The long-term costings programme was fought over inside the Department and then reported on annually in the Defence White Paper, when the consequences of the scheme became clear. We would never end up in a situation where we had a £35 billion overrun, so when did we stop doing that second point exactly?
We have never stopped having annual planning rounds; we still have them. Let me repeat what I said to the hon. Member for North Devon (Nick Harvey), the Liberal Democrat spokesman: Bernard Gray does not say that there is a £35 billion hole in the defence budget; he talks about the gap between the original estimates and extrapolates that across the whole programme to the final costs.
The issue is not just about changes in military requirements, is it? It is about technological advances, too. The military want the latest and the best. The latest and the best, as the Secretary of State said, is at the leading edge of technology; and the leading edge of technology now changes every 18 months, not 18 years, therefore the military re-specify. May I suggest to the Secretary of State that it is good to distance the procurement process from immediate demands, to ask the military to shape and identify the final product that it wants and then to hand the product over to a contractual basis that is as separate from the Ministry of Defence as it possibly can be?
That is Bernard Gray’s proposal, and we are not taking it up, but we will explore whether we can put the appropriate distance between the different parts of the organisation, DE&S, the main building and the services themselves, by perhaps establishing a trading fund. That might be the way in which we can achieve the appropriate distance without losing effective control. That idea is being looked at as part of the process, and we will come back to the House.
Sadly, service personnel whom I know, and, indeed, their families, will probably not be too surprised by the report’s findings. Bernard Gray found that a staggering £2.2 billion a year is spent on managing delays and overruns. When our Territorial Army is suffering training cuts, do not we need an MOD that is focused on our soldiers on the front line?
Again, the hon. Gentleman misreads the report. He has had the weekend, but perhaps he wants to take a little longer to look at it. On the TA, as I said the other day, I make no apologies for shifting the focus towards Afghanistan and making absolutely certain that, in every sense, support for Afghanistan is the main effort. Nobody in the TA will lose out on the training that is necessary for deployments to Afghanistan.
The Secretary of State has seen this outstanding report, but it addresses merely equipment. Given the number of wounded coming back from Afghanistan, and the appalling nonsense in the training mechanisms to get the troops through the system, when is he going to produce a similar report on the awful state of recruiting, particularly to the combat arms?
I have had conversations with the hon. Gentleman in the past, on and off the record, to try to capture his views on what we should be doing on training and recruitment. He knows that in the past year the Army has made huge steps in the right direction as regards recruiting, and I would have thought that he was happy with that. I do not see the same issues applying to recruitment as apply in DE&S. That is why the report was procured in the first place—to try to identify the lessons that we badly need to learn and address.
In the spirit of transparency referred to in the report, will the Secretary of State clear up the reason for the two-year delay to the carriers—was it the Lynx helicopter or the JSF? Can he guarantee that there will be no further delays to the carriers?
There were other pressing requirements for current operations that we needed to get into the programme—most significantly, the Lynx Mk 9. I would have thought that Members in all corners of the House recognised that we urgently needed that upgrade to our helicopter capability for current operations, which was a greater priority than keeping the then profile of the carrier. Yes, of course there were cost increases in stripping the carrier, but was it the right thing to do? I believe that it was, and that the helicopters were important enough for us to make those adjustments.
The Government are to be commended for commissioning this report; the report itself is commendable and the Secretary of State has said nothing unreasonable in response to it. However, I sense a lack of urgency. The report says nothing that the Defence Committee has not been saying for a great many years about the unaffordability of the existing programme, and we need to make decisions now. What are we going to do to prevent a period of paralysis from gripping the Government until a general election?
With fast-changing technology and military requirements, there will always be cost and delivery overruns, whatever Government are in control—it is not a political issue but just a matter of fact. We know that the Trident project is already unaffordable; in the light of the Gray report, will the Secretary of State now abandon it?
No. Our position was set out in the White Paper of two years ago, and it has not changed. We should not—I say this to the hon. Gentleman with the greatest respect—look at the UK’s deterrence policy off the back of short-term financial issues. This is a strategic decision to be taken by the nation, and it should be considered and taken in that light.
I welcome the report, as do many Members. However, having served on the Public Accounts Committee for four years, I remember the projects that were running then and the legacy of overruns in costs and delivery times. Where do we find someone brave or foolish enough to say no to the defence chiefs?
Getting the strengthened system of governance in the Department so that projects are not allowed, in any circumstances, to enter the programme without realistic costings, and having the skills in order to make those costings, will bring the appropriate focus at the start of the process instead of halfway down the line, as I am afraid often happens with very long projects. Some of these projects take 20 years to come to fruition. People are focused on the capability improvement at the start of the process; only part-way through it do the costs begin to kick in to the full extent. We have to get that balance right.
Point of Order
On a point of order, Madam Deputy Speaker. I have given Mr. Speaker notice of this point of order, which relates to Wednesday’s debate on Equitable Life. Many right hon. and hon. Members, myself included, suffered financial loss as a result of the failure of the Equitable, and therefore we have a pecuniary interest in the outcome of the report on the matter and the Government’s considerations. We are going to need some guidance, if Mr. Speaker can give it, as to the propriety of voting on matters in which we have a pecuniary interest, and whether it is possible in some way to register that interest. Otherwise, we will be voting without the public knowing that we have a pecuniary interest, which is intrinsically rather difficult to justify.
I understand that there is in fact long-standing advice on the matter from the Registrar of Members’ Financial Interests. If a new point has arisen, perhaps the right hon. and learned Gentleman would write to Mr. Speaker. I suggest that he take his point to the registrar, who will give the necessary advice.
Further to that point of order, Madam Deputy Speaker. I tried some time ago to register with the registrar the fact that I had a pecuniary interest, namely that both my wife and I suffered loss as a result of the failure of the Equitable. I was not able to register it, as it was decided not to be an appropriate subject for registration. I therefore have some difficulty in seeing how Members can declare to the public that we have such pecuniary interests.
[18th Allotted Day]
Economic Recovery and Welfare
I beg to move,
That this House recognises the jobs crisis facing thousands of households as unemployment continues to rise with nearly 2,000 people a day losing their job; regrets the UK’s declining competitiveness; further regrets the Government’s failure to roll out effective recession schemes to offer support to the struggling small and medium-sized enterprises sector; calls on the Government to do more to increase UK competitiveness through cancelling their planned increase in the small companies tax rate, reducing corporation tax, and restarting their stalled plans for better regulation; further calls on the Government to tackle unemployment and long-term worklessness by replacing the Flexible New Deal, Pathways to Work and the various other New Deal programmes with a new integrated programme to provide personalised long-term support for people out of work, including those on incapacity benefit, and to make better use of private and voluntary sector welfare-to-work providers by paying them by results.
These are terrible times for British industry of all kinds, and certainly for more than 2.5 million unemployed people in this country. We are coming to the end of probably the worst recession that anyone living can remember, and I certainly hope that a weak and feeble recovery is at least on the point of starting now or during this winter. What we obviously need to do as a country is start straight away to recreate the economic and business conditions that can restore economic growth and employment opportunities to more normal levels, although I am afraid that it may take some years before we are able to do that. I agree with the latest quarterly report of the Bank of England, which foresaw a long and slow recovery ahead of us. I think it will be quite a few years before we get back to what we used to call “trend growth” in the British economy.
Unfortunately, because of political events, we face a winter in which all that is being presided over by a Government of the living dead, as someone once described them. They are a weak Government, who no longer have any particular policies and do not feel able to take any initiatives in any area. The Prime Minister, in particular, is obsessed by the day-to-day management of news handling and the press, and there is very little sign that anybody is determinedly trying to tackle the underlying problems, not least because that would require some startling changes of opinion.
I will give way in a moment, but I do not know whether my right hon. Friend read The Sunday Times last weekend. I am indebted to it for a short story showing that the Secretary of State for Business, Innovation and Skills is mainly concentrating on the branding of the confused range of schemes that he has produced, using the Government’s party political slogans in various publications, which shows where that master of marketing’s true priorities lie. At least on that he will be in full agreement with the Prime Minister.
In the economic competitiveness review that I and colleagues produced for the Conservative party, we said we thought the growth rate the Government were achieving was entirely artificial and built on excessive debt, which would have to be corrected. We said that the trend rate of growth was now unfortunately well below 2 per cent. Does my right hon. and learned Friend agree that not only will it take a long time to get back to the old rate, but that we might not do so because of the damage that the Government have done?
I always used 2.5 per cent., but was always tempted to put it up because the combination of our supply side reforms and globalisation in the mid-1990s made me think that 2.75 per cent. might be possible. The Government finally started accepting 2.75 per cent. in the middle of a crazy boom, which they were taking credit for, but they have collapsed from that.
I must say that since my right hon. Friend the Member for Wokingham (Mr. Redwood) carried out his review, I have not sat down and seriously thought what the trend growth is likely to be. He thinks 2 per cent. could be trend for some time. We have certainly destroyed a lot of capacity as the recession has gone on, and the important thing to realise is that although we all hope we are about to see at least the first statistics showing signs of recovery, it will be a long, hard road ahead and normality does not mean returning to the bubble conditions of two or three years ago. At that time, I was saying that any growth we were sustaining was entirely buoyed up by a sea of debt, both public and private. That has turned out to be the case. Many others said the same, and all the warnings were ignored.
We must face up to reality, but this Government will not do so. The Prime Minister thought that the boom was a triumph for his personal management of the economy and constantly took credit for it. When the crisis first came, he denied its existence, then he said it was caused solely by sub-prime mortgages in the mid-west of the United States, although the state of our mortgage market showed that something very similar had been flourishing here for some time and was indeed about to crash. When the crisis hit us, it was nothing to do with the Prime Minister, his handling of economy or the system of regulation that he put in place for the City, and the fiscal deficits that he was accumulating were quite irrelevant to the problems!
The recovery may start soon. The statisticians are on our side: the economy went off a cliff in autumn last year, so minuscule growth, compared with where we were 12 months ago, becomes, statistically, an increasingly likely outcome. When that tiny first shining growth comes, the Prime Minister will claim that he saved the world from calamity and that the recovery is under way, whereas we have seen him panic-stricken and overwhelmed by events throughout the crisis ever since it started.
It is therefore up to the country to start to look to what we can do to restore our economy. Now we need a Government who will face up to the reality of our problems honestly, and who will, with determination, restore our hopes for a quick return of confidence to businesses, followed by some recovery in economic activity in this country. Probably most important of all, we need opportunities for the army of unemployed people—not just for young people, but perhaps particularly for them because they are the innocent victims of the mad events of the past four or five years.
This is not an economic debate, but we must take into account the economic background to what we are talking about, which is obviously the main menace to business. Such recovery as we are achieving is, in my judgment, almost wholly dependent on the low interest rates and the printing of money in which the Bank of England has had to engage. Quantitative easing is probably necessary—I do not think I would terminate it rapidly, but that is a matter for the Bank—and probably must continue. However, we have no signs yet of a return to a private sector-led, confident recovery in the real economy.
Of course, what is happening at the moment, particularly the quantitative easing, cannot be sustained. It is altogether an experimental, emergency measure. The Government are able to finance their deficit only because the Bank of England “buys” the gilts that it issues. That is printing money to stop the money supply sinking into a black hole. As a short-term policy, I think we agree with it. I certainly think it should probably be continued for the time being and stopped as soon as possible. It is not a long-term basis for recovery. Even President Mugabe discovered that printing money is no way simply to meet ones obligations and Government debts, or to sustain the economy. That is the first reality.
What is keeping us going at the moment is a set of emergency measures, largely taken by the monetary authority. This is not a debate about the banks, and they are no longer looking as though they are on the point of total collapse, but we are not out of the woods yet. The banking and financial system is not back to normality. There are many issues that we must address before we can get back to feeling confident in and secure about British or any other international banking.
The main effect, in the short term, is that lending to companies is extremely weak. Credit remains a vital problem for many businesses, especially small and medium businesses on which the majority of employment depends. We are just reaching the stage at which larger companies are able to start going to the bond markets for some of their capital because of the abnormally low level of interest rates, but that route is not open to any of the small and medium businesses that employ the majority of our constituents. We all could compare the experience that we have in our constituencies— and, if we make visits, outside—of encounters with people who have viable businesses. Some of them need support to get through what they can reasonably argue is a temporary dip in demand for their goods and services, and others need ordinary credit for working capital. The atmosphere is not as bad as it was, but many perfectly good companies still cannot obtain credit or can do so only at rates that are vastly higher than those that would be regarded as normal.
Banks are weak—not surprisingly—and they have put up their margins in every branch of their business. Most of the banks are in such trouble that they prefer borrowers who are as secure as the Bank of England and who will pay miles above the rate that the bank has to pay to obtain money itself, to try to restore profitability and their balance sheets. The reality for the supply chain of many of our great industries and for all our small and medium enterprises is very bad indeed.